This opinion will be unpublished and

may not be cited except as provided by

Minn. Stat. § 480A.08, subd. 3 (1996).




Jayne Marecek and Sonia Cairns,



Alan Yelsey,



Marecek, Cairns & Yelsey, Inc.,



The 50/50 Marketing Group, Inc.,

d/b/a Machine Dreams,


Filed May 12, 1998


Mulally, Judge*

Hennepin County District Court

File Nos. 95-3716/95-14249

Kevin M. Koepke, Thomas F. Ascher, Caldecott Daniels Forro Koepke & Ascher, P.L.C., 10 South Fifth Street, Suite 1020, Minneapolis, MN 55402 (for appellants Alan Yelsey and 50/50 Marketing Group)

Dennis L. Peterson, Peterson, Fishman, Livgard & Capistrant, P.L.L.P., 3009 Holmes Avenue South, Minneapolis, MN 55408 (for respondents Marecek and Cairns)

*Retired judge of the district court, serving as judge of the Minnesota Court of Appeals by appointment pursuant to Minn. Const. Art. VI, § 10.

Considered and decided by Willis, Presiding Judge, Klaphake, Judge, and Mulally, Judge.



Appellant Alan Yelsey seeks review of the trial court's interpretation of a shareholders' agreement and denial of his claims alleging breach of fiduciary duty and improper valuation. Appellant, The 50/50 Marketing Group (50/50), seeks review of the court's determination to hold it jointly liable for Yelsey's debts. Because the trial court's findings are not clearly erroneous and because the trial court did not abuse its discretion in fashioning an equitable remedy, we affirm.


Appellant Yelsey and respondents Jayne Marecek and Sonia Cairns formed a corporation, respondent Marecek, Cairns & Yelsey, Inc. (MCY), in which they were the sole shareholders. Appellant 50/50 is a separate corporation solely owned and operated by Yelsey. The three shareholders of MCY managed the affairs of that corporation through a shareholders' agreement that required unanimous approval of all matters set to a vote. Relations between the three shareholders quickly became strained and they entered into a second shareholders' agreement, which divided MCY into three teams, each of which was headed by one of the shareholders. Each team functioned as a separate business under one corporate umbrella, responsible for its own expenses, revenues, and a one-third share of certain agreed-upon corporate overhead. Each team had access to a portion of MCY's line of credit and was responsible for payment of the team's usage of this line of credit. Also under the terms of the agreement, the shareholders agreed that all revenue earned by 50/50 would be reported to and collected by MCY for redistribution. Neither the first nor second agreement dealt with issues of discontinuation of business, dissolution or liquidation. The second agreement specifically stated that it superseded the first agreement.

Six months later, the principals signed another agreement seeking to define the role of 50/50. While the document states that MCY and 50/50 have no legal or financial obligation to one another, it also states that 50/50's role was to produce fees and revenue to aid Yelsey in covering his MCY team's expenses and MCY's corporate overhead.

By March 1994, the parties were unable to agree unanimously to certain changes in overhead and Yelsey moved out of the MCY corporate offices. In late September 1994, Marecek and Cairns changed the locks on the MCY offices and shortly afterward voted to discontinue business, over Yelsey's objections. Marecek and Cairns applied the proceeds of the sale of certain corporate assets and the return of a piece of technology to MCY's corporate debts. They then assumed debts, including $51,000 Yelsey had borrowed against the line of credit and $8,000 of a term loan, which all three shareholders had personally guaranteed. A third loan, originally incurred by Yelsey, but assumed by MCY when formed, was not paid. Respondents sued to recover Yelsey's share of the debts paid and Yelsey claimed breach of the shareholders' agreement and fiduciary duty.

The trial court found that the management of MCY was deadlocked and ordered Yelsey and 50/50 to pay Yelsey's share of MCY's debts, offset by credit for respondents' two-thirds share of the third outstanding loan. This appeal followed.



A reviewing court is not bound by a trial court's decision in a strictly legal matter. Frost-Benco Elec. Ass'n. v. Minnesota Pub. Utils. Comm'n., 358 N.W.2d 639, 642 (Minn. 1984). However, if the trial court's findings are not clearly erroneous based upon the evidence, and the conclusions of law are sustained by the findings, deference should be given to the trial court's decision. In re Estate of Hoffbeck, 415 N.W.2d 447, 449 (Minn. App. 1987), review denied (Minn. Jan. 28, 1988).

Yelsey seeks to have the original shareholders' agreement declared enforceable, but it matters very little which of the agreements remained enforceable, since neither agreement deals with the precise situation that occurred. The trial court concluded that, because the affairs of MCY were deadlocked due to Yelsey's move from the corporation and the subsequent decision to discontinue business, it had jurisdiction pursuant to Minn. Stat. § 302A.751 (1996). We conclude that the trial court properly used its power to intervene to fashion equitable relief under Minn. Stat. § 302A.751. "Granting equitable relief is within the sound discretion of the trial court. Only a clear abuse of that discretion will result in reversal." Nadeau v. Ramsey County, 277 N.W.2d 520, 524 (Minn. 1979).

Respondents sought relief under Minn. Stat. § 302A.751, subd. 1(b)(1), which allows a court to grant "any equitable relief it deems just and reasonable" when a deadlock exists in the management of corporate affairs. When fashioning a remedy after a determination of deadlock in a case involving a closely held corporation, the court

shall take into consideration the duty which all shareholders * * * owe one another to act in an honest, fair, and reasonable manner in the operation of the corporation and the reasonable expectations of all shareholders as they exist at the inception and develop during the course of the shareholders' relationship with the corporation and with each other. For purposes of this section, any written agreements, including employment agreements and buy-sell agreements, between or among shareholders or between or among one or more shareholders and the corporation are presumed to reflect the parties' reasonable expectations concerning matters dealt with in the agreements.

Minn. Stat. § 302A. 751, subd. 3a.

Based upon the shareholders' agreement, the court's conclusion that each party should be responsible for the debts its team incurred is a reasonable reflection of the parties' expectations. Moreover, the choice of December 31, 1994, as the date of valuation is also a reasonable solution, given the existence of MCY's debts, lease obligation, and use of the calendar year for accounting purposes.


Yelsey alleges that respondents breached their fiduciary duty towards him by selling assets of MCY over his objections and excluding him from the premises shortly before the cessation of business. "Whether shareholders breached their fiduciary duty to other shareholders is generally a question of fact." Miller Waste Mills, Inc. v. Mackay, 520 N.W.2d 490, 496 (Minn. App. 1994), review denied (Minn. Oct. 14, 1994).

A reviewing court must determine whether there is sufficient evidence to support the trial court's findings of fact and should view that evidence in a light most favorable to the prevailing party. Evans v. Blesi, 345 N.W.2d 775, 779 (Minn. App. 1981), review denied (Minn. June 12, 1984). The trial court's factual findings will not be overturned unless clearly erroneous. Id.; Minn. R. Civ. P. 52.01.

The trial court found that the sale of assets had taken place after notice was given, that Yelsey had the opportunity to bid, and that the highest bid, that of respondents, was accepted. Respondents did lock Yelsey out of the office, but this occurred in the last several days prior to cessation of business and his property was immediately made available to him. The lock out also occurred long after Yelsey had physically moved from the MCY offices. Based on these facts, the trial court's findings are not clearly erroneous.


Appellant 50/50 claims that the trial court erred in holding it jointly liable for Yelsey's debts. Under Minnesota law, a corporate entity can be held liable for the debts of an individual when evidence supports a finding that the corporate entity and individual are alter egos of one another. BBCA, Inc. v. United States, 733 F. Supp. 73, 74 (D. Minn. 1989). There is a two-pronged test for reaching liability under this theory: (1) the relationship of the individual and the corporation must be such that the distinction between the two becomes blurred and the corporation seems to be a mere "façade" for the dealings of the individual; and (2) "piercing the corporate veil [must be] necessary to avoid injustice or fundamental unfairness." Barton v. Moore, 558 N.W.2d 746, 749 (Minn. 1997).

Based on the evidence, the trial court could reasonably conclude that Yelsey and 50/50 are so inextricably linked that each is the alter ego of the other.